Litigation: FTC whittles away “up to” claims

Advertisers commonly use “up to” claims in their marketing campaigns to tout the maximum benefit a consumer may achieve from a product or sale. Until earlier this year, the accepted industry standard for such claims was as follows: An advertisement is not deceptive or misleading as long as 10 percent of consumers are able to achieve the maximum results advertised and others are able to achieve results in the middle of what is advertised. The Federal Trade Commission’s (FTC) actions in 2012 whittled away at this standard.

In February 2012, the FTC announced the settlement of cases against five companies that sell replacement windows. The cases stemmed from exaggerated and unsupported claims the companies made about the energy efficiency of their windows and the amount of money consumers could save on energy bills by purchasing them. The companies involved were Gorell Enterprises, Inc., Long Fence & Home, LLLP, Serious Energy, Inc., THV Holdings LLC and Winchester Industries.

Gorell’s “40% Energy Savings Pledge” pledged savings of up to 40 percent of home fuel consumption for heating and cooling in the first year after installation or repayment of up to $500 of the difference. Long Fence & Home guaranteed consumers 50 percent savings on energy usage. Long’s website contained a “savings calculator” on which users could enter their average monthly energy bills and click a button to calculate savings. Serious Energy promised that its windows were “guaranteed to reduce your heating and cooling use by up to 49 percent” and that it would pay consumers up to $500 if they did not save that much money in heating and cooling costs within one year of window installation. THV claimed that its windows would reduce consumers’ monthly energy bills by 35 percent to 55 percent and would “pay for themselves in energy savings alone in eight years or we will pay the difference . . . or our windows are free.” Winchester represented that the design of some of its windows could save consumers “up to 50% a year” in energy costs.

In each case, the FTC concluded that the companies’ claims were unsubstantiated and constituted deceptive practices. The settlements are designed to stop the companies from engaging in these practices in the future. They bar each company from claiming that consumers buying its products will achieve up to, or a certain amount or percentage of energy savings, or from guaranteeing that consumers will achieve such a savings, unless the claim is not misleading and is supported by competent and reliable scientific evidence that all or almost all consumers are likely to achieve the maximum savings claimed at the time it is made. The settlements also prohibit each company from claiming that a certain number or percentage of consumers buying its product will achieve energy savings unless the claim is not misleading and is substantiated by reliable scientific evidence. The cases are part of the FTC’s ongoing initiative to make certain that environmental marketing is truthful and substantiated by adequate scientific proof.

In conjunction with its investigation of the companies, the FTC commissioned a research study of consumers’ expectations of “up to” claims in marketing materials. In June 2012, the FTC released the results of the study, which concluded that when consumers are exposed to such claims, many are likely to believe that they will achieve the maximum “up to” result. The FTC has indicated that “the report will help guide advertisers to avoid the use of misleading ‘up to’ claims.” According to the FTC, the report “reinforces the FTC’s view that advertisers using these claims should be able to substantiate that consumers are likely to achieve the maximum results promised under normal circumstances.”

The FTC’s message to advertisers is to avoid deception when making “up to” claims and to expect higher scrutiny of such claims. Only time will tell as to the full impact of the FTC’s shift in position on the industry standard for “up to” marketing claims. The FTC’s current stance is plainly inconsistent with the industry standard that only 10 percent of consumers must realize the maximum benefit. The new standard appears to be that an “up to” claim is misleading and deceptive unless all or almost all consumers are likely to achieve the maximum result and the advertiser, at the time the “up to” claim is made, possesses solid scientific evidence to substantiate its claim. The bottom line is that advertisers should proceed with caution when making “up to” claims and seek guidance from legal counsel when in doubt.

Contributing Author

Jennifer Tucker

Jennifer S. Tucker is a partner in the Business Litigation Practice at Lathrop & Gage LLP. She has 17 years of experience handling civil disputes...